After last month’s failure of Silicon Valley Bank and the resulting banking crisis, economists and market experts are now turning their attention to the bigger picture, and unfortunately, the outlook is bleak.
Cathy Wood, founder and principal of ARK Investments, has pointed out that the velocity of money is slowing, and the likelihood of a ‘hard landing’ is increasing.
In his view, we are more likely to see a sharp downturn in the economy in the near future due to a confluence of higher interest rates, a decline in the movement of money through the economy, and worst of all, tightening of credit. While banks are facing solvency crisis.
“The Fed made a huge mistake. Credit default swaps from January 2022 are warning us about a coming banking crisis… We are moving from a liquidity crisis to an insolvency crisis. A liquidity crisis happens suddenly, banks runs, and they seem to be under control. These banks still have problems when it comes to solvency. The first problem is the one everyone now understands – an interest-rate mismatch…that’s more than earnings Will be,” Wood said.
Even though Wood is preparing for the worst, she isn’t giving up on the stock market. Lately, Wood has been loading up on two stocks that fit a certain profile; They offer game-changing potential and that may be too cheap to ignore — both are currently changing hands for less than $5. Both also have strong triple-digit upside potential, according to TipRanks, the world’s largest database of analysts and research, indicating the potential for further upside.
Butterfly Network (BFLY)
Wood’s first choice is Butterfly Network, a medical technology firm that works in the ultrasound field. While ultrasound technology has long been known in medical imaging, Butterfly has taken it to a new level by specializing in the development of portable, handheld ultrasound scanner technology. They take advantage of the miniaturization made possible by modern semiconductor chips to create ultrasound imaging systems that are easier to use, more accessible and cost less than older systems.
Butterfly’s systems are currently available in the US, Australia, the UK and most of Europe, where they have earned a solid reputation for quality. The system has found use in a wide range of medical applications, from its traditional strongholds of OB/GYN and cardiac care to ER rooms and nursing care — and even primary care offices and veterinary hospitals.
Butterfly recently achieved a significant milestone earlier this month by receiving FDA clearance for its AI-enabled lung imaging tool. The Auto B-Line Counter could potentially change the way medical professionals perform evaluations on adults with potentially low lung function, allowing for faster diagnosis and treatment. The system, based on machine learning, was trained through access to a database of over 3.5 million anonymized ultrasound images.
While this FDA approval bodes well for Butterfly, the company’s most recent 4Q22 quarterly report was a mixed bag. Revenue of $19 million was essentially flat year-over-year, but it fell short of the Street’s estimate of $19.93 million. On the other hand, the EPS loss of 17 cents per share was better than analysts’ estimated loss of 22 cents per share for Q4.
The result is the stock down 41% over the last 12 months.
There’s a lot to like here in Cathy Wood. He bought 3,741,000 shares this month through his ARKG (ARK Genomic Revolution) fund. This brings Wood’s total holding in BFLY to over 12.9 million, which is currently valued at $31.86 million.
Reflecting Wood’s positive stance, Cowen analyst Joshua Jennings explained the bull-case.
“BFLY made significant progress in each of its four strategic growth pillars during 2022 and is now optimally positioned to capitalize on the high growth handheld U/S market opportunity in 2023 and beyond. 2023 revenue growth guidance implies growth of ~20% at the midpoint and reflects the impact of the building sales funnel and new commercial strategies during the year,” Jennings said.
Kumar adds an Outperform (i.e. Buy) rating to his commentary, and completes his stance with a $6 price target, which reflects his belief in 143% growth over the next 12 months. (Click here to view Jennings’ track record)
Overall, 4 recent analyst reviews on this stock include 3 Buys against a single Hold, giving BFLY its Strong Buy consensus rating. The stock is currently trading at $2.47 and its $5.06 average price target has ~105% upside potential by the end of this year. (Look BFLY Stock Forecast,
Somologic, Inc. (SLGC)
For another of Wood’s picks, let’s turn to Somologic, a clinical diagnostics company focused on proteomics, the large-scale study of proteins and their application to biomarker discovery. The Boulder-based firm provides a research platform that fosters the discovery of ‘effective and safe’ treatments to improve diagnosis and patient outcomes. Somologic’s approach combines assay services with diagnostics to create one of the world’s most comprehensive clinical proteomic databases.
Through its work with proteins, Somologic’s research in proteomics has the potential to revolutionize the precision medicine niche. The company is working to address unmet medical needs in a wide variety of disease conditions, and its work applies to medical professionals in direct care delivery, research, and even data analytics.
In a development that investors will be watching closely, Somlogic last month announced changes to its upper levels of management. These included the appointment of four new members to the company’s board of directors, including the addition of Jason Ryan to the position of chairman of the board. In addition, Somlogic also announced that Adam Tach, former Exec VP of Life Sciences, has filled the position of Interim CEO. The company’s previous CEO, Roy Smythe, stepped down on March 28.
At the same time the company announced its sweeping management changes, it also released financial results for the fourth quarter and full year of 2022. On the top line, quarterly revenue was down 18% to $18.8 million — though the figure beat forecasts by $1.77 million, or 10%. On the bottom line, the firm’s Q4 earnings, its GAAP EPS, came in at 26 cents per share. It was a blow on two counts; That’s coming in well below the 16-percent EPS loss it reported in the year-ago quarter, and missed forecasts by 5 cents.
The stock is down a brutal 60% in the past 12 months. However, Cathy Wood should think that healthcare disruption provides good value right now. He has bought 1,422,263 shares in the last two weeks, making purchases through ARKG Fund. He now holds a total stake of 11,810,923 shares in Somlogic, which is currently valued at $32.24 million.
Wood isn’t the only bull here. Canaccord Genuity analyst Kyle Mixon takes an upbeat outlook here, writing: “In our opinion, Somlogic appears poised for solid revenue growth and improving profitability over time as the company benefits from its recent initiatives. Shares Provides ample potential for our price targets.
Quantifying this, Mikson gave the stock a Buy rating and a $5 price target, targeting 83% upside for the next 12 months. (Click here to view Mikson’s track record)
Overall, this is Strong Buy’s consensus rating based on 3 recent analyst reviews, all positive. The stock has a $2.73 trading price, and its $6.33 average price target suggests an upside of ~132% for a one-year horizon. (Look slgc stock forecast,
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ equity insights.
Disclaimer: The views expressed in this article are those of select analysts only. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
